State’s Workers’ Compensation Law Contains Conflicting Provisions For Protecting Subcontractors

The Court of Appeals of Texas recently considered whether the Texas Workers’ Compensation Act (TWCA) bars suit against an independent subcontractor whose employees were covered by the general contractor’s workers’ compensation insurance policy.  The court, after determining that two provisions of the TWCA are in conflict, failed to answer the question and instead affirmed the lower court’s denial of summary judgment as a matter of law.  The question, therefore, remains an open one.

In the case, an injured worker employed by a contractor sued a subcontractor for negligence.  The subcontractor argued that the suit was barred under the exclusive remedy provision of the TWCA.  Section 406.123 of the TWCA provides that “An agreement under this section [whereby a general contractor and a subcontractor agree that the general contractor provides workers’ compensation insurance to the employees of the subcontractor] makes the general contractor the employer of the subcontractor and the subcontractor’s employees only for purposes of the workers’ compensation laws of this state.”  The TWCA also provides, however, in Section 406.122(b) that “A subcontractor and the subcontractor’s employees are not employees of the general contractor for purposes of this subtitle if the subcontractor (1) is operating as an independent contractor; and (2) has entered into a written agreement with the general contractor that evidences a relationship in which the subcontractor assumes the responsibilities of an employer for the performance of the work.”

In this case, the court recognized that the subcontractor “both” entered an agreement under which the general contractor agreed to provide workers’ compensation coverage to the subcontractor’s employees and a written agreement under which the subcontractor assumed the responsibilities of an employer for the performance of the work.  The court, however, did not decide how to resolve the conflicting provisions and instead affirmed the lower court’s denial of summary judgment and remanded the case (the trial court had granted permission for its denial of summary judgment to be appealed).